Infra & housing projects to keep India’s cement demand strong: Moody’s

• India's cement production will climb by around 6-8% over fiscal years 2023 and 2024.
  
• A growing housing sector, which typically accounts for 60-65% of India's cement consumption, will remain a key demand driver.
  
• In the Union Budget for fiscal 2024, the government allocated $1.8 billion to safe housing, clean drinking water and sanitation.
  

Infrastructure-led investments and mass residential projects will keep India’s cement demand strong, according to a Moody’s Investors Service report.

It also said that India's cement production will climb by around 6-8% over fiscal years 2023 and 2024, following a 21% jump in FY22.

“A growing housing sector, which typically accounts for 60-65% of India's cement consumption, will remain a key demand driver. Also, continued large investments in roads and infrastructure projects will fuel cement demand,” said Moody’s.

India built 12,000 kilometers of highways in 2022 alone and this momentum will likely continue in 2023 and 2024, supported by various government initiatives.

Furthermore, in the Union Budget 2023-24, the government allocated $1.8 billion for the creation of safe housing, clean drinking water and sanitation, and increasing road and telecom connectivity, among other initiatives. The government has also allocated $9.6 billion to address urban housing shortages.

Elevated costs to hit profitability

While cement demand remained solid in the world's second-largest cement market for most of FY23, profitability slid sharply, largely owing to elevated costs of pet coke, coal and diesel.

“A sequential, quarter-on-quarter, decline in these costs will prevent a further sharp decline in profitability, although a return to the unusually high profits cement producers enjoyed in fiscal 2022 is highly
unlikely,” Moody’s said.

The agency predicted that the EBITDA margin for leading pan-India cement producer UltraTech Cement, will fall to about 18% in FY23 and around the 20% mark in FY24. It had hit 23%-26% for FY22.

Following the acquisition of Holcim's India cement operations by Adani group, several cement producers announced new capacity additions totaling 60 million tonnes that will likely keep capacity utilization under 70% and prevent sharp price increases.

India’s cement production has been going up in the last few years, after seeing a drop FY21 to less than 300 million tonnes. Currently, it stands around 350 million tonnes and according to Moody’s it will steadily climb due to a robust infrastructure growth.

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